3. Mr. Adama Fatty is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Adama is considering: 2 State of Nature Decision Alternative    Good Economy      Poor Economy Stock Market                80,000                    -20,000 Bonds                            30,000                     20,000 CDs                                23,000                     23,000 Probability                      0.5                           0.5 a) What decision would maximize expected profits? b) What is the maximum amount that should be paid for a perfect forecast of the economy? c) Develop an opportunity loss table for the investment problem, what decision would minimize the expected opportunity loss? What is the minimum EOL?

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3. Mr. Adama Fatty is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Adama is considering:
2
State of Nature
Decision Alternative    Good Economy      Poor Economy
Stock Market                80,000                    -20,000
Bonds                            30,000                     20,000
CDs                                23,000                     23,000
Probability                      0.5                           0.5
a) What decision would maximize expected profits?
b) What is the maximum amount that should be paid for a perfect forecast of the economy?
c) Develop an opportunity loss table for the investment problem, what decision would minimize the expected opportunity loss? What is the minimum EOL?

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